Why do your savings shrink even when you don't spend more?
Hyperinflation
Why do your savings shrink even when you don't spend more?
Imagine saving money in a country where prices for everything, from bread to cars, suddenly double every day.
Hyperinflation means the value of money drops fast because prices rise quickly. Your savings can't buy as much as before because the currency is worth less. The technical term for this is "hyperinflation."
Example
If you saved 100 and prices doubled every day, by the end of the week, your 100 would barely buy a loaf of bread.
Remember this
Hyperinflation erodes savings by decreasing the purchasing power of money.
Text adapted from Wikipedia, licensed under CC BY-SA 4.0.
Related concepts
Deflation
Deflation increases the real value of money
Interest rate
Raising interest rates makes borrowing more expensive
hyperinflation looks like
How can money lose its value so fast?
Inflation
How does pumping more money into the economy affect prices and savings?
Glossary of economics
Ever wondered why your savings don't keep up with rising prices?
Paradox of thrift
Paradox of thrift: individual saving decreases aggregate demand and gross output
Educational content, not financial advice.
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